Question
Bertram and Ernest share profits and losses equally after salary and interest allowances. Bertram and Ernest receive salary allowances of $40,000 and $60,000, respectively, and
Bertram and Ernest share profits and losses equally after salary and interest allowances. Bertram and Ernest receive salary allowances of $40,000 and $60,000, respectively, and both partners receive 10% interest on their average capital balances. Average capital balances are calculated at the beginning of each month, regardless of when additional capital contributions or permanent withdrawals are made subsequently within the month. Partners' drawings of $3,000 per month are not used in determining the average capital balances. Total net income for 2014 is $240,000.
BertramErnest
January 1 capital balances$200,000$240,000
Yearly drawings ($3,000 a month)(36,000)(36,000)
Permanent withdrawals of capital:
June 3(24,000)
May 2(30,000)
Additional investments of capital:
July 380,000
October 2100,000
If the average capital balances for Bertram and Ernest are $200,000 and $240,000, what will the total partnership profit allocations be for Bertram and Ernest in 2014?
B: (200,000*10%)+salary 40,000+ 48,000(why? and how? )
E:(240,000*10%)+salary 60,000+48,000(why? and how?
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